Senate passes modified income tax phaseout, attaching conditions

Whatever happens to Senate Bill 259 in the last two weeks of the legislative session, almost all Louisiana senators can tell their constituents during the fall campaigns that they supported eliminating personal and corporate income taxes over 10 years.

File photoSen. Rob Marionneaux

But the 35-4 vote in favor of Sen. Rob Marionneaux's proposal belies the complex web of political maneuvering that preceded it. More important was a 21-17 vote for an amendment, sponsored by Sen. Jack Donahue, R-Covington, that sets a series of conditions for any tax cut:

First, a panel of legislative leaders and other authorities must convene to come up with a plan to handle the lost revenue by eliminating existing tax breaks, cutting public services or a combination of both. That body would submit its ideas to the 2012 Legislature, which could modify the proposals as it sees fit. But only in the event of a final resolution would any income tax cuts go into effect.

Marionneaux and other Democrats derided the measure, accusing Republicans aligned with Gov. Bobby Jindal of trying to kill the bill without voting against it. The vote on the Donahue amendment fell largely along party lines. The governor has said through his aides that he would back a repeal only when lawmakers come up with a plan to deal with the lost revenue, and it is clear that the GOP chief executive does not want an outright phase-out or repeal to reach his desk in an election-year. Still, the governor has not opposed the idea publicly.

Creative tactics were not the exclusive province of Marionneaux's opponents. The senator last week won a 7-3 vote in the Senate Finance Committee when he told his colleagues that he would, on the floor, present amendments that would offset the lost tax proceeds by rolling back existing exemptions, deductions, rebates and other breaks. He outlined two such options at the opening of debate this afternoon, but told Senate President Joel Chaisson II, D-Destrehan, that he didn't want them added to the bill.

The reason: Because those changes would raise revenue, they would effectively turn the bill into a tax hike requiring a two-thirds majority. Later in the debate, when Sen. Dan Claitor, R-Baton Rouge, unveiled a litany of amendments to end exemptions, Marionneaux added another wrinkle: Legislative rules require all tax increases to originate in the House of Representatives. Claitor withdrew his amendments.

Marionneaux told his colleagues that his plans to phase out or suspend exemptions could be attached to other tax measures later in the session. Under legislative rules, it would almost certainly have to be a House bill, and, even then, there could be some debate over whether a Senate amendment would violate the rule concerning revenue-raising measures originating in the lower chamber.

All gamesmanship and procedural questions aside, the final vote sends the bill on to the House, where the party dynamics on the issue are not as clear cut. Ways and Means Chairman Hunter Greene, a Republican like Jindal, has his own income tax cut bills but has delayed action pending the Senate vote. Greene is now in a position to move -- and potentially amend -- Marionneaux's bill, while abandoning his own.

As the Senate bill is written, the tax phaseout -- if authorized by legislative action next year -- would begin in 2013, with a tenth of the levy being cut. The same amount would be cut annually until the corporate and individual income levies were eliminated in 2023. The changes would cost $133 million in revenue in fiscal 2012-13, with that number climbing rapidly thereafter.

Corporate and individual income tax, according to Department of Revenue figures, generated $2.675 billion in fiscal 2009-10, the last completed, audited budget year. That is expected to balloon to $5.1 billion by fiscal 2023, making those levies together the largest portion of the revenue pie used to finance most of state government, from K-12 and higher education to the prison system and Medicaid insurance program.